ITF briefs analysts on Gorgon LNG project costs and delays

Maritime Union of Australia says Chevron has its head in the sand where Gorgon costs are concerned

MAY 28, 2014 — The International Transport Workers' Federation (ITF) yesterday held an investor briefing with analysts in New York to give its view on why Chevron's Gorgon LNG project in northwestern Australia is over-budget and delayed.

The ITF is working closely with its affiliate, the Maritime Union of Australia (MUA), as part of a global campaign to build awareness over delays and cost overruns on the project which was originally costed at $37 billion but has now blown out to $54 billion.

The ITF says that local company management and business lobby groups have unfairly blamed the MUA for problems on the Gorgon project, as the union seeks to negotiate a new Enterprise Bargaining Agreement for maritime workers working in the offshore oil and gas sector.

A report, undertaken by Bradon Ellem, Professor of Employment Relations at the University of Sydney Business School, found the Gorgon delays and cost blowouts are due to a range of logistical factors and poor management decisions, with unions and industrial relations playing a negligible role overall.

The report, entitled "What is Happening on Chevron's Gorgon Project?" has found that not only are wages a small part of the costs, most of the figures used in public debate have been misleading.

Its findings run contrary to local Chevron management and business lobby groups' commentary around the project. Instead, the massive blowout in costs are mainly due to logistical delays. Such delays are common with megaprojects, the report finds.

These findings are consistent with research undertaken by BIS Shrapnel that found that the wages of maritime workers make up less than one percent of the $54 billion cost of building Gorgon.

The University of Sydney report also found that workers on the project have been frustrated with a lack of consultation from management, which could have potentially prevented many of the delays.

"If you read much of the commentary surrounding Gorgon's problems you would have to conclude that its issues circulated primarily around labor law, labor unions, labor costs or labor effort," ITF President and MUA National Secretary Paddy Crumlin said. "Yet when you actually conduct some in-depth research on the topic the findings bear little resemblance to these reports. The unsurprising reality is that workers on the Gorgon project want it to succeed every bit as much as management.

"When you start interviewing them you find out that they are just as frustrated with many of the delays - delays they believe could have been avoided had management consulted with them in a cooperative manner, instead of using them as scapegoats."